Nearly two-thirds (65%) of hourly workers don’t use all the financial benefits their company offers them. That’s according to The State of Employee Financial Health Benefits, a report by Wakfield Research and Even based on the survey of 1,000 hourly workers at large U.S. companies.
The main reason why? Half of hourly workers say their benefits packages don’t match their financial needs. Put more bluntly, most can’t afford their benefits.
This mismatch gives employers an opportunity to win the recruiting and retention battle by offering benefits aligned with workers’ financial realities. Recent research by Betterment confirms this:
Findings like these show employers and employees alike see the importance of financial wellness in recruiting and retention. What’s less clear is how to correct the mismatch that makes half of all hourly workers say their financial benefits don’t fit their needs. But several themes emerge from Wakefield Research’s survey that show employers where to start.
401(k) offers a strong example of how most hourly employees’ benefits are mismatched to their financial needs. Consider that 2 in 3 hourly workers (65%) know their company offers a 401(k) or retirement plan. But 1 in 5 or less say the same about shift and pay tracking (22%), financial coaching (19%), or a financial well-being app or program (18%).
Many HR and benefits leaders know they’re lopsided toward retirement, too. More than 70% of employers sponsor 401(k) as a benefit according to Financial Benefits for Hourly Workers, a survey report by Human Resource Executive (HRE) and Even. But less than 16% of employers sponsor benefits such as earned wage access (EWA), emergency savings, or disaster relief.
Yet it’s those less-offered financial benefits that would create the most impact for your hourly workforce. That’s reflected by the top two reasons hourly workers don’t use all their benefits:
This doesn’t mean 401(k) doesn’t matter. On the contrary, the majority of hourly workers (48%) say participating in a 401(k) would make them feel more financially secure than any other benefit. And with the SECURE Act mandating employers must track part-time employees for 401(k) eligibility, companies have incentive to help hourly workers participate.
But despite incentives on both sides for 401(k), it’s still a mismatched benefit. Most hourly workers face too much income volatility to participate. They can’t risk lowering their take‑home pay by contributing to retirement, no matter how much they’d like to. But what’s causing that stress for hourly workers, and how can employers help?
Covering gaps between paychecks is a chronic form of financial stress for hourly workers. Nearly 9 out of 10 (87%) feel some level of financial stress according to Wakefield’s survey. It’s not that hourly workers don’t have the money to cover these gaps, either. It’s that financial realities such as biweekly pay keep employees’ money frozen when they need it.
Digital disruption only increases the urgency to pay faster. The explosion in consumer financial tools translates to higher expectations from your hourly workers. If employees can use a bank app to deposit their paycheck 48 hours ahead of payday, then why are they waiting weeks to get paid from their employer?
Faster pay is a necessity, not a luxury, in hourly employees’ eyes. A telling stat: More than 3 in 5 hourly workers (63%) are at least somewhat concerned about debt because they can’t access their paycheck fast enough. For low-wage earners, it’s not a question of if a gap between paychecks will happen, but when. According to Ernst & Young (EY), the three main causes of these gaps are:
More than 3 in 5 hourly workers (63%) are concerned about debt because they can’t access their paycheck fast enough.
When these gaps happen, hourly employees go to great lengths to avoid debt. According to Wakefield’s survey, most respondents withdraw savings or borrow from family and friends before turning to a credit card or payday loan. Some take more drastic action, like the 25% of hourly workers who have pawned something for cash, or the 22% who have turned to a food bank for groceries.
So how do employers give their hourly employees faster access to their pay, and at the same time help them build the financial wellness needed to participate in benefits like 401(k)?
Three-quarters (73%) of hourly workers want their company to offer and pay for earned wage access per Wakefield’s survey. What’s more, nearly 3 out of 5 (57%) would likely leave for a similar paying job if it offered free on-demand access to their paychecks.
This rising demand for earned wage access, or EWA, makes sense. It lays the foundation for hourly workers to build financial wellness by helping them cover gaps between paychecks. Instead of resorting to a high-interest credit card or payday loan (or eating overdraft or late fees), employees withdraw a portion of their accrued wages. Gaps are covered without employees taking on debt.
Nearly 3 out of 5 hourly workers (57%) would likely leave for a similar paying job if it offered free on-demand access to their paychecks.
The demand for employer-sponsored EWA specifically, too, aligns with what HR and benefits professionals already know: Sponsored benefits drive the most impact. Three-quarters of employers (74%) agree or strongly agree that sponsoring financial benefits drives higher adoption than making employees pay for them, according to HRE’s survey report.
Offering EWA as a benefit gives you an edge in recruiting and retention. It shows hourly workers you understand their challenges and are invested in their success. But how do you build a financial benefits package that starts with EWA, and offers all the tools hourly employees need to reach 401(k)?
Learn how to build a financial benefits package that attracts and retains hourly workers by joining the webinar “Keep 3 out of 5 hourly workers from leaving your organization” on January 25th. You’ll learn how forward-thinking employers like PayPal, Walmart, and Noodles & Company are using their own internal data to build benefits packages for their hourly employees.
Sign up for the webinar here.
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